Countries and Regions

	Table of Contents
p. 13 of 25 BACK | NEXT I. Country Performance Assessment II. Country Operational Strategy III. Sector Strategies A. Agriculture B. Infrastructure C. Social Infrastructure and Environment D. Governance Dimensions of ADB Operations E. Gender Dimensions of ADB Operations F. Province Level Interventions G. Private Sector Development IV. Regional Cooperation V. Donor Activities and Aid Coordination VI. Cofinancing and Catalyzing External Resources VII. ADB’s Operational Program VIII. Economic and Sector Work Program IX. Local Cost Financing

Country Assistance Plans - Pakistan : III. Sector Strategies

---

A. Agriculture

1. Agriculture and Rural Development

47. Agriculture remains the most important sector for employment and income generation. The sector, including forestry, livestock, and fisheries, accounts for about 26 percent of GDP and more than 45 percent of employment. It generates directly and indirectly about 70 percent of export earnings. Growth in the sector has declined from an annual average of 4.1 percent in the 1980s to 3.4 percent in the 1990s, and deteriorating productivity and increasing environmental damage threatens the sustainability of agricultural output. Pakistan's agriculture requires reforms to achieve sustainable production and marketing systems, modernization and diversification to improve competitiveness and higher value added, and a supportive policy and institutional environment for private investment. The constraints in the sector include imperfections in land markets and land distribution; irrigation inefficiencies and increasing deterioration of land quality; an inadequate rural transport network; inefficiencies in public sector marketing of certain agricultural inputs and outputs; poor quality of research and extension; and restricted access to credit by small farmers. The ongoing ADB-financed sector strategy study will develop strategies and action plans to address these constraints¹⁹. An Agriculture Program Loan for $200 million has been included in 2002 to assist the Government to implement these strategies and action plans. Within the framework of this proposed loan, enforcement and improved implementation of agricultural income tax through harmonization of tax rates and coverage across provinces will be addressed.

48. Agriculture is also important in the context of rural development and poverty reduction. In the rural areas where about 67 percent of the country's population lives, agriculture is the major sector for employment and income generation. Also, over 70 percent of the country's 36 million poor live in rural areas. Community-based multi-sectoral area development projects have proven to be successful in poverty reduction. However, success also requires specific measures such as better targeting, improved rural financial policies and mechanisms to enable small farmers and the landless to access financial services. While rural credit programs are being emphasized by the Government, much rural employment relies on the non-farm sector. Non-farm income is an important contributor to the livelihood of rural households, especially those in the lower income groups and among the landless and smaller farmers. It is important for poverty alleviation. ADTAs for NWFP Rural Development Strategy (2000), and Agribusiness Development (2002) have been included. PPTAs for FATA Rural Development (2001), Punjab Barani Phase III (2002), and Balochistan Rural Poverty Reduction (2003) have also been programmed to prepare poverty-targeted rural development projects. Following these TAs and to reduce rural poverty, build sustainable local institutional capacity and address key development constraints, rural development loans have been included for NWFP Barani Area Development Project, Phase II (2000) for $52 million, and Sindh Rural Development Project (2001) for $40 million.

2. Forestry and Natural Resources

49. Water resources management plays a crucial role in the country's overall development, as about 90 percent of crop production depends on irrigated land. In the water sector, the ADB has a significant track record and the ongoing portfolio includes loans and TA support for irrigation, flood control and drainage.

50. Future ADB investments in the water resources sector and related policy dialogue will focus on making the reforms initiated under National Drainage Program (NDP)²⁰ work, and lead to accelerated agriculture growth and poverty reduction. Under NDP, Provincial Irrigation and Drainage Authorities (PIDA) were introduced in each of the four provinces to enable establishment of financially autonomous organizations, i.e., Area Water Boards at the main canal level and Farmer Organizations at the secondary canal level. The underlying principle of these reforms is to decentralize the operation and maintenance functions and reduce government subsidies, in particular for irrigation and on-farm drainage. To support the efforts for reforms and improve overall water resource management, assistance for rehabilitation and improvement of irrigation and drainage systems will be selectively considered, as well as new water resources development initiatives within the context of rural development and poverty alleviation.

51. No additional forestry sector activities are planned at this time after completion of the Sindh Forestry Project in 2001 and attention will mostly focus on implementing the ongoing Forestry Sector Project in NWFP²¹. In that Project the ADB is assisting in strengthening the capacity at the federal level to monitor the implementation of the Government's Forestry Water Plan.

____________________

Back III. Sector Strategies	Next B. Infrastructure